March 14, 2019, | AtoZ Markets - The Basel Committee is warning against the bitcoin growth considering it as a bad sign for the global banking system. Will the expansion of the crypto assets turn into a threat to the global financial market?
Bitcoin growth is obvious despite its high volatility and risk
The Basel Committee on Banking Supervision (BCBS) is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters. The organization in one of its latest newsletters pointed on the bitcoin growth. The Basel committee noted that despite a high degree of risk and volatility, people continue purchasing crypto, which might become a threat for banks.
The Basel Committee newsletter says :
“While the crypto-asset market remains small relative to that of the global financial system, and banks currently have [minimal] direct exposures, the Committee is of the view that the continued growth of crypto-asset trading platforms and new products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks.”
Global Banking System might collapse due to bitcoin growth
The statement of the committee was a result of growing speculation around cryptocurrencies. According to the Basel banking supervision board, bitcoin activists consider digital currency technology as a way of fighting the so-called corrupt banking system. They believe that decentralized asset technology will distribute wealth more evenly and openly than a regular bank, which could create money by simply printing it. Such beliefs led many to start a "financial revolution" with the support of cryptographic protection. The purpose of the protest is to replace the global financial reserve, the US dollar, with an asset whose offer is limited and methodologically. The committee expressed concern that if more people join such a demonstration, it may ultimately devalue existing financial systems.
According to the committee, such crypto enthusiasts will spend fiat money to purchase the digital assets, created mathematically. The banking supervision believes that such actions ultimately will lead to chaos.
The bitcoin growth is threatening
According to the experts most people who deal with cryptocurrency, are speculators. They want to get the most out of their assets. Despite the remaining controversy surrounding digital assets, its prices gained stability.
Basel Committee is concerned about the growing interaction of cryptocurrency holders with a well-established financial system with support for fiat systems. According to them, the lack of rules and excessive price volatility in the crypto asset markets create risks for banks that do business with these nascent markets.
The Basel Committee stated that it monitors the development of crypto active assets, including their direct and indirect impact on banks, to find out how this will protect banking systems from their high risks.
“The Committee will in due course clarify the prudential treatment of such exposures to appropriately reflect the high degree of risk of crypto-assets,” the newsletter read. “It is coordinating its work with other global standard-setting bodies and the Financial Stability Board.”
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